Until a few days ago, DS considered investing in cryptocurrencies to be one of the best decisions of his life. He had invested €80,000 ($84,300) in Luna — double the €40,000 ($42,200) he had invested nearly a year ago. When he opens the application today to see how much he has left of it, the vision looks bleak: €4 ($4.22). “It seemed like one of the safest bets. Even as bitcoin dropped in value, Luna hit all-time highs. They wanted to start a lot of projects and they were backed by investment funds,” says the 32-year-old Spaniard, who has seen most of his savings evaporate in just three days after the digital currency collapsed.
His story is repeated around the world. Luna was developed by Terraform Labs, owned by 30-year-old South Korean Do Kwon. Until a few days ago, it was considered one of the biggest success stories in the industry. Last week, before the collapse, a young Luna investor described Kwon as “a visionary, the Elon Musk of the future.” Tens of thousands of retail investors around the world put their money into Luna, which was once valued at $18 billion. But opinions about Kwon have changed now as investors come to terms with their losses. On forums like Reddit, once-ardent supporters regret their losses, with some users expressing suicidal thoughts. And now Kwon fears for his safety. After the Luna crash, a stranger broke into the premises of Kwon’s apartment, rang the doorbell and asked his wife if her husband was home before running away from the premises. Kwon’s wife has reportedly sought police protection.
It’s an unsettling end to a period of unbridled euphoria. When Luna’s value rose from $4 in February 2021 to $60 in the same month of 2022 – a fifteenfold increase in just one year – no questions were raised about the sudden surge, instead it was expected that it would continue to rise. Few suspected that everything would fall apart. “I invested because it was one of the Top Cryptocurrencies. It was in the top 10 by market capitalization. I was excited about the project and the profitability of its stablecoin was incredible,” explains another young man from Madrid who is under 30 years old and lost €5,000 ($5,300).
The stablecoin he is referring to is TerraUSD or UST. A stable yield of up to 19% was offered to investors who deposited UST in the “Anchor Protocol”, a lending and lending protocol created by Terraform Labs. In a context where few banks give more than 0% due to low interest rates, this anomaly went unchallenged by winning investors, blinded by the power of a new technology that promised to make them rich. But UST lost its peg to the US dollar, and that sent Luna, its sister currency, into a health spiral. Luna lost more than 90% of its value in three days, triggering one of the biggest shocks in the crypto sector’s short history. But big losses aren’t always a deterrent. “I still think it can turn around and I haven’t sold anything. On the contrary, I bought more. When a guy goes to a party and spends €50 [$53] on drinks on something affecting his health, no one asks him if he thinks it’s wrong to throw that money away. At least it doesn’t harm my body,” says the 30-year-old from Madrid.
Other Luna investors have completely given up hope of a comeback, which experts also rule out. One investor, a 41-year-old doctor who, like the others affected by the crash, is speaking on condition of anonymity, says he will limit his cryptocurrency investments to the two biggest from now on: Bitcoin and Ethereum. “I lost two months’ salary, about 8,000 euros [$8,500]So nothing has changed for me. My investments are diversified and the percentage I have in cryptocurrencies is very small, but I think it’s a blow to the future crypto adoption that is so much talked about. For now, I’ll stay on the sidelines and just reinvest the profits,” he says in a message on Telegram, which has multiple groups of Luna investors.
Yuvraj Sharma from India is one of the few people willing to give her full name. There’s little risk of his friends and family reading the news, and the $200 he lost at Luna hasn’t turned his life upside down either. But for the 19-year-old economics student from Calcutta, it’s more money than it appears. “It’s a lot for me because it took me a lot of effort to get it. That’s two months wages. I still hope that something will be done to fix this devastating crash and that I’ll be able to at least return what I’ve invested,” he says. The probability of that happening is close to zero. Luna’s price today is $0.0002.
The case of Sharma underscores a growing trend: more and more young people are investing in cryptocurrencies without a safety net. The fact that they don’t have large sums of money to invest is the only thing keeping them from losing large amounts of money in a sector that they don’t fully understand. The question now is will these young investors persevere and invest more once they start earning more, or is this just a temporary trend that will fade over time.